This is my rant for the day. The CMEGroup sold out the floor traders and retail traders to the highest bidders — the Ken Griffins and Vinny Voilas of the world.
I had a plan going into the CPI number, but the news-headline algos totally and completely took over the tape. I know it sounds like I’m a crybaby, but the PitBull agrees with me. I told him that the bots use artificial intelligence that knows the exact millisecond when the public gets too short or too long.
Here’s how it works.
The algo and HFT firms pay the exchanges hundreds of millions of dollars to ‘front run’ our orders. It’s in every market, not just the ES. How do you think guys like Vinny and Ken get to make $3 or $4 billion in a year? Actually, forget that. Citadel — Griffin’s firm — made $16 billion last year, a record for a hedge fund.
I know there is nothing we can do about it, but at least we know where the money goes when we get stopped out of the futures as they ping-pong around.
/ end rant.
With that out of the way, where does it leave us? The ES initially dumped lower on the CPI reading, which was no surprise given that the YoY figures came in hotter than expected and the MoM figures were in-line with expectations.
But then the ES spiked higher by 55 points in about three minutes before resistance in the 4175 to 4180 area knocked it back down. Overall, the bulls did a hell of a job keeping the S&P 500 from falling apart. In fact, the SPX ended lower by just 0.03% — call it flat.
All of this action still looks like a big back-and-fill to me. At the same time, we now have three lower highs on the chart — 4208.50, 4188.25, and now 4186.50.
Further, I have a hard time getting bulled up after the market’s big start to the year and a potential recession looming ahead. Now, this hotter-than-expected CPI report gives me the feeling that the Fed may need to ramp up its hawkish action even more.
Our Lean: I’m a seller of the rallies. While I’m not sure the ES can climb into the 4150 to 4160 region, it’s a zone I’d be willing to sell into if we get there. A sustained move over 4160 and I’m wrong. If that’s the case, I’m not willing to fight the trend and if they want to take it back to Tuesday’s high, they can. That’s the bigger resistance area anyway.
On the downside, keep 4120 on your radar, then 4100 to 4105.
MiM and Daily Recap
Pre-CPI the Globex range in the ES was 4149.25 up to 4163 just before the release. Just before the number, the ES dropped 6 points then sold off down to 4131.50 and then shot up to 4186.50, and then dropped back to the 4140 area.
On the 9:30 ET futures open the ES traded 4131.50 and immediately sold off down to 4114 and then rallied back up to 4170, and then sold off down to a new low at 4103.75 at 11:50. Can you say shake & bake? After the low, the ES ‘gradually’ rallied back up to 4145.50 and then pulled back the 4137 level at 1:45, then rallied up to 4154.75.
After the ES pulled back to the 4143 level, it traded 4154 as the 3:50 cash imbalance showed $1.5 billion for sale — that’s now five straight “for sale” days, by the way — dipped to 4149, bounced to 4156, then traded 4146 on the 4:00 cash close. Ultimately, it finished lower by less than 2 points or 0.04%.
In the end, there was a big pick-up in volatility. In terms of the ES’s overall tone, the ES is just sloshing around trading the same prices over and over. In terms of the day’s overall trade, volume was higher at 2.32 million contracts traded.
NYSE Breadth: 52% Upside Volume
Advance/Decline: 46% Advance
It takes just a few good trades a week to make a trader successful at what they do. Ringing the register a couple of times on NVDA and AMD really helped this week and so did our strong start to the week on Monday.
Yesterday, the ES faded from a key resistance area, then gave us a big doji candle. The bad news is, it’s an “indecision” bar. The good news is, a break of its range gives us something to trade.
(Forgive my lack of charts this week. That hot CPI print + the good trades we have on the books + the lack of truly high-quality setups has me sort of waiting out the market a bit to see who takes control).
S&P 500 — ES
The ES couldn’t take out resistance, but failed to break down yesterday. From here, watch the Globex low and 10-day ema at 4120. Below that opens the door to 4100 to 4105, then 4185.
Below 4185 and last week’s low is in play near 4060.
On the upside, 4150 to 4160 is the resistance we are watching. Above that puts 4175 to 4180 back in play, followed by this week’s high and last week’s high between 4186 and 4188.
Well, well, well — look where the SPY ran into resistance. Keep this one simple, folks.
On the upside, yesterday’s high is key at ~$415. Above that puts last week’s high in play near $416.50, but the SPY really needs to clear both of these levels if it wants a larger move to the upside — like the gap-fill up near $421.
On the downside, the two-day low comes into play around $408.25 to $408.50 & the 10-day. That’s the line in the sand for support.
A break of this level and failure to regain it puts ~$405 back in play.
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be B/E or better stops.)
** = previous trade setup we are stalking.
NVDA — long from $210 & Trimmed ⅓ at $219+, $223+ and $230
Absolute beauty thus far. Down to ¼ against a B/E or better stop. Up to you on how to manage from here
AMD — trimmed down to ½ position at $85 to 86. Trim down to ⅓ if we see $87+
Stop-loss of B/E or better now
**CAT — long on a weekly up rotation over $252.14. First target would be $258 to $261. Stop at $242.
*Feel free to build your own trades off these relative strength leaders*
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!